Can MMSI Sustain Its 22.2% Gain in the Past Month as Growth Improves?

Merit Medical Systems, Inc. MMSI shares have climbed 22.2% in the past month, shifting attention from the size of the rally to whether earnings momentum can support it.

The latest quarter provided stronger evidence. Revenue growth accelerated, adjusted earnings beat expectations and management raised its 2026 outlook. Still, the stock now trades above its sub-industry valuation multiple, while tariffs and competitive pressure remain meaningful offsets.

Q2 Strength Gives MMSI’s Rally Fundamental Support

Second-quarter 2026 revenues rose 9.5% year over year to $418.8 million and surpassed the Zacks Consensus Estimate by 3.5%. Adjusted earnings of $1.19 per share increased 18% and beat the consensus mark by 23.9%.

Organic revenues increased 9% at constant currency, excluding acquisition contributions and the DualCap divestiture. U.S. revenues increased 11.5% at constant currency, while international revenues rose 4.7%, giving the quarter a broader operating base for the recent share-price advance.

Merit Medical’s Therapeutic Mix Is Accelerating

Therapeutic revenues increased 15% on a reported basis, while organic sales advanced 11.7%. Cardiac Therapies and Endoscopy revenues rose 24% and 29%, respectively, making the faster-growing therapeutic portfolio an increasingly important part of the mix.

Merit Medical has also broadened its oncology and endoscopy exposure through OneMark and the C2 CryoBalloon. Competition remains substantial. Boston Scientific Corporation BSX competes across cardiovascular, endoscopy and interventional oncology categories. Medtronic plc MDT also has broad cardiovascular and endoscopy exposure, raising the importance of product differentiation and commercial execution.

MMSI Margin Gains Need a Tariff Reality Check

Adjusted gross margin expanded 260 basis points to 55.8%, supported by pricing, product mix, acquisition performance, manufacturing transfers, automation and lower reliance on air freight. Adjusted operating margin also rose 140 basis points to 22.6%.

The tariff-adjusted picture is less dramatic. Excluding tariff refunds, adjusted gross margin was 54.2%, up 98 basis points, while adjusted operating margin was 20.9%, down 22 basis points. Management now expects approximately $16 million of tariff costs in 2026, which could limit further margin progress.

MMSI Valuation Tests How Much Upside Is Priced In

MMSI trades at 20.3X forward 12-month earnings versus 17.6X for its Zacks sub-industry. That premium suggests investors are already assigning value to the improving growth and earnings outlook.

The multiple is still below the stock’s five-year median of 24.5X. That leaves room for a higher valuation if execution stays strong, but the current premium reduces the margin for disappointment after the recent rally.

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Merit Medical’s Estimates Still Point Higher

The Zacks Consensus Estimate for 2026 earnings has moved 5.3% higher in the past four weeks. Management also raised adjusted earnings guidance to $4.25-$4.35 per share from $4.01-$4.15 and lifted its 2026 revenue range to $1.631-$1.643 billion.

Estimate momentum is constructive, though risks remain. Consolidation among healthcare buyers can pressure pricing, while management’s 2026 outlook assumes an approximately 80-basis-point benefit to reported revenue growth from foreign exchange. Currency moves can therefore add variability to reported results.

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MMSI Momentum Leads Its Style Profile

The 22.2% monthly gain now has better fundamental support from organic growth, margin progress and estimate revisions. Valuation and tariff exposure, however, make the next leg of the move more dependent on continued execution.

MMSI currently carries a Zacks Rank #3 (Hold), pointing to a balanced short-term view. Its Momentum Score of A is favorable, while its Value Score of C and Growth Score of C keep the style picture mixed. The VGM Score of B adds support, but the Hold rank stops short of signaling the stronger near-term setup associated with top-ranked stocks. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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